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04/16/2014

Beige Book: Warming Economy Accompanies Spring’s Thaw

Eight times a year, each of the 12 Reserve Banks gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources. Their findings are reported in the Summary of Economic Conditions, also known as the Beige Book. The report is published on the Federal Reserve Board of Governors' website about two weeks prior to each Federal Open Market Committee meeting.

The first sentences of the national summary and each Bank's report often receive much attention because the lead sentence tends to summarize economic conditions in that region.

Here is a compilation of the first sentence of the national summary and each Reserve Bank’s report:

  • National: Reports from the twelve Federal Reserve Districts suggest economic activity increased in most regions of the country since the previous report. (A previous SouthPoint post also mentioned the weather’s effect on overall economic conditions.)
  • Boston: The First District economy continues to expand moderately, according to business contacts, although growth rates vary across sectors and firms.
  • New York: Economic activity in the Second District rebounded since the last report, as the harsh winter weather abated.
  • Philadelphia: Aggregate business activity in the Third District grew at a moderate pace during this current Beige Book period.
  • Cleveland: On balance, economic activity in the Fourth District declined slightly in the past six weeks.
  • Richmond: The Fifth District economy expanded moderately since our last report.
  • Atlanta: On balance, the Sixth District economy expanded at a modest pace from mid-February through March.
  • Chicago: Growth in economic activity in the Seventh District picked up in March, and contacts generally maintained their optimistic outlook for 2014.
  • St. Louis: Business activity in the Eighth District has declined slightly since our previous report.
  • Minneapolis: The Ninth District economy continued to grow at a moderate pace since the last report.
  • Kansas City: The Tenth District economy grew moderately in March, and most contacts were optimistic about future activity.
  • Dallas: The Eleventh District economy grew at a moderate pace over the last six weeks.
  • San Francisco: Economic activity in the Twelfth District continued to improve moderately during the reporting period of mid-February through early April.

As you can see, almost all districts are experiencing the same level of economic activity.

Here are some notable highlights from the Atlanta Fed's contribution to the Beige Book:

Consumer spending and tourism

  • District merchants reported an uptick in activity from mid-February through March following sluggish sales in January, which were widely attributed to the severe winter weather. Light motor vehicle sales grew modestly during the time period.
  • Hospitality contacts in areas negatively affected by the adverse winter weather saw improvements in activity.

Real estate and construction

  • Brokers reported home sales were mixed. Inventory levels continued to fall on a year-over-year basis, and the majority of contacts reported that home prices remained ahead of the year-earlier level.
  • The majority of builders reported that construction activity and new home sales were ahead of the year-earlier level. The majority of contacts continued to report modest home price appreciation.
  • District brokers noted that demand for commercial real estate continued to improve. Construction activity continued to increase at a modest pace from last year.

Manufacturing

  • Manufacturers reported increased activity across the region from mid-February through March. Significant improvements were cited in production and new orders.

Banking and finance

  • Bankers noted an increase in loan demand.

Employment

  • District payroll growth remained constrained from mid-February through March.

Prices and wages

  • Nonlabor input costs increased very slowly, with a few noted exceptions, including rising costs for developed land, construction materials, and food. Profit margins remained tight across most industries as contacts continued to report very little pricing power.
  • Contacts continued to indicate little wage pressure outside of some high-skilled positions.

The next Beige Book will be published June 4.

Photo of Teri GaffordBy Shalini Patel, an economic policy analysis specialist in the Atlanta Fed's research department


April 16, 2014 in Construction, Economic conditions, Economic Indicators, Employment, Housing, Jobs, Labor Markets, Manufacturing, Prices, Purchasing, Real Estate, Unemployment, Weather | Permalink

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04/14/2014

Our Bread and Butter

It’s spring, which means warming weather, getting out the gardening tools, and convening the semiannual meeting of the Atlanta Fed’s Agriculture Advisory Council, which represents diverse agriculture and agribusiness interests across the Southeast.

Prices are always a topic of conversation at council meetings. This meeting was no exception, and here are some examples of what we heard:

  • Fertilizer prices are up.
  • Feed prices are down from last year’s highs.
  • Fuel costs have been stable over the last year.
  • Equipment and seed costs are up.
  • Beef prices are up, and some producers are considering increasing herd size because of favorable prices and lower feed costs.
  • The value on the very best farmland is holding up, but farmland prices may see some corrections, with the biggest changes expected on marginally productive land.

Citrus greening is reducing the supply of Florida oranges, and growers continue to seek ways to mitigate the effects of the disease. Even though costs for products that help fight the disease are up, growers are saying, “If you think it works, you do it.” Growers hope that new research funding included in the recently approved farm bill will help find a solution, but concern also exists that as production declines, processing infrastructure will be lost, which may make it challenging to expand in the future.

Foreign markets have also affected growers. For example, cotton prices are in flux as a result of China’s pricing policy, while dairy prices are enjoying an uptick because of China’s increased purchases. Poultry producers expect this year to be a good one. The poultry industry is setting export records, and producers are saying exports represent future growth.

Finding labor remains difficult for most producers, and the problem is no longer just finding the numbers they need but increasingly finding those with the necessary technical skills as well. Producers are encouraging local junior colleges to offer technical programs for farm workers: “We need fewer but better-educated laborers,” one source said. There is also a growing need for data-management skills. Many growers will outsource data management/analysis to big companies specializing in that area.

Council members agreed that the outcome of the newly signed farm bill remains uncertain as the details are worked out, but they anticipate large farm producers will have to significantly restructure their businesses.

Another challenge is coming from the consumer side, as buyers require unprecedented amounts of information about health and wellness and sustainability processes from agriculture producers. Advisory council members acknowledge that technology makes it possible to supply this information, but the group recognized the need for agriculture producers to have a seat at the table when discussing new requirements.

As the meeting drew to a close, we went around the table one last time, and these comments are among what we heard:

  • “We will get more efficient.”
  • “There will not be a lot of inflation in agriculture in the next year or two.”
  • “Agriculture will go through another cycle of de-peopling,” but “…as the labor required to produce is decreasing, value and next-step processing is not shrinking.”

As I reflect on all I heard that day, I know technology will continue to play a big role in agriculture production, and its use is expanding every day. I also know from talking with our council members that good old-fashioned tenacity, know-how, and the love of farming shine through. The continued marriage of these disciplines will literally be our bread and butter for years to come.

Photo of Teri GaffordBy Teri Gafford, a Regional Economic Information Network director in the Atlanta Fed’s Birmingham Branch


April 14, 2014 in Agriculture, Commodity Prices, Outlook, Prices, Productivity, Southeast, Technology | Permalink

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02/27/2014

Southeast Housing Update: Modest Improvement Continues

According to the latest results from our Southeast housing market poll, contacts continued to indicate that growth remained positive. More than half of our Southeast builder and broker contacts reported that sales increased modestly on a year-over-year basis (see the chart).

January 2014 Southeast Home Sales vs. a Year Earlier

Many builders indicated that buyer traffic had increased on a year-over year-basis. Reports from brokers were mixed (see the chart).

January 2014 Southeast Buyer Traffic vs. a Year Earlier

The majority of our Southeast builder panel indicated that inventory levels had remained unchanged from year-earlier levels, although most of our Southeast broker panel indicated that inventory levels had fallen from year-earlier levels (see the chart).

January 2014 Southeast Home Inventory vs. a Year Earlier

Most brokers and builders continued to report that home prices had increased slightly in January compared to year-ago levels (see the chart).

January 2014 Home Price vs. a Year-ago

Two-thirds of brokers reported that the amount of available credit either met or exceeded demand (see the chart).

Brokers: How available do you perceive mortgage finance to be in your market?

Similarly, two-thirds of builders indicated that the amount of available credit met or exceeded demand (see the chart).

Builders: How available do you perceive mortgage finance to be in your market?

It’s worth noting that while this picture hasn’t drastically improved over time, it hasn’t deteriorated much either despite the recent implementation of mortgage regulations (for example, thequalified mortgage rule, which went into effect on January 10). We plan to keep a close eye on this question as the year unfolds.

Residential construction update
Our builder contacts indicated that construction activity increased slightly on a year-over-year basis but remained unchanged month over month. Nearly three out of four builders reported that activity was in line with their plan for the period.

You may recall from previous SouthPoint posts that builders have faced challenges securing acquisition and development financing for lot development (here) and that builders identified lot availability as one of the biggest risks to their outlook (here). We posed a special question to our builder panel in an effort to gain more insight into the current lot inventory situation. Here are a few of the main takeaways:

  • Overwhelmingly and regardless of the market, builders reported that finished lots are extremely hard to come by in desirable locations. With few finished lots in the most desirable areas, many builders have moved to B and C locations for vertical construction. (B locations have become the new A locations, and C locations have become the new B locations.)
  • As a result of the increased demand for finished lots in good locations, contacts indicated that lot prices were appreciating rather quickly, and that this rate of price appreciation was problematic because the added cost on the front end does not align with the valuation that can be achieved on the back end.
  • A few builders reported that they were in the process of developing new lots in A locations, but many more contacts noted that it was cost-prohibitive to develop raw land in any location at this time. The latter group reported that private acquisition and development money was available to fill the void that banks have left but noted that it was more expensive and would significantly raise the cost of development to the point where it becomes no longer viable. No one on the builder panel seemed to think that it would be viable to develop raw land in B and C locations at this point.

Outlook on sales and construction activity
Over the next three months, most builders and brokers expect home sales to increase. Although expectations remain fairly positive, contacts were slightly less optimistic about sales growth relative to their year-earlier responses (see the charts).

Southeast Builder Home Sales Expectations Next 3 Months

Southeast Broker Home Sales Expectations Next 3 Months

Nearly two-thirds of builder contacts expect construction activity to increase over the next three months. With that said, builders’ outlooks appear to be slightly less optimistic relative to their year-earlier responses.

Southeast Builder Construction Expectations Next 3 Months

Note: January poll results are based on responses from 42 residential brokers and 23 homebuilders and were collected February 3–12, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.

If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


February 27, 2014 in Construction, Economic conditions, Economic Indicators, Housing, Inventories, Prices, Real Estate, Southeast | Permalink

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02/04/2014

Southeast Commercial Construction Update Strikes Upbeat Note

The Atlanta Fed’s fourth quarter 2013 commercial construction poll results were fairly optimistic. The majority of commercial construction contacts indicated that pace of nonresidential construction activity (measured by square feet) and the pace of multifamily construction (measured by number of units) had increased from year-earlier levels (see the charts).

Pace of Nonresidential Construction Activity (sq ft) versus a Year Ago

Pace of Multifamily Construction Activity (# of units) versus a Year Ago

Most contacts reported backlogs greater than year-earlier levels, suggesting a healthy pipeline of construction activity (see the chart).

Backlog versus a Year Ago

More contacts reported upward pressure on labor costs than in previous polls (see the chart). Perhaps not surprisingly, this trend of upward pressure on labor costs for commercial contractors is consistent with our recent reports (here and here, for example) of upward pressure on labor costs for residential builders.

Labor Costs versus a Year Ago

Most contacts also noted upward pressure on material costs and have consistently reported this pressure several quarters in a row (see the chart).

Material Costs versus a Year Ago

Relative to recent polls, the number of respondents reporting that the amount of available credit exceeded demand increased; the number of respondents reporting that the amount of available credit fell short of demand also increased (see the chart). Another way of viewing the results is that more than half of the respondents indicated that amount of available credit met or exceeded demand, which has been the case for three consecutive quarters.

How available do you perceive commercial construction finance to be in your market?

When asked what type of projects will dominate the landscape during 2014, business contacts indicated that they plan construction activity across a wide variety of property types. The property types mentioned include multifamily housing/senior housing, education, office, health care/medical, infrastructure/energy, retail/restaurant, municipal buildings, hotels, and industrial/warehouse.

Note: Fourth quarter 2013 poll results were collected January 6–15, 2014, and are based on responses from 19 business contacts. Participants of this poll included general contractors, subcontractors, lenders, developers, and material fabricators with footprints of varying sizes across the Southeast.

If you are a commercial contractor and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


February 4, 2014 in Construction, Housing, Prices, Real Estate, Southeast | Permalink

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01/28/2014

Are the Clouds Lifting in the Sunshine State?

Each month, the Atlanta Fed produces a Data Digest for each state in our district. Beyond providing an economic snapshot for each state, the Data Digest also breaks down the information by metro area or industry, where appropriate.

Florida’s latest Data Digest indicates that the state’s overall economic activity is improving. For example, a broad measure of economic performance—the Coincident Economic Activity Index, which the Philadelphia Fed compiles for all 50 states—has been steadily improving since 2010 and improved at a slightly faster clip than the nation since August 2013 (see the chart).

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Looking at Florida’s labor markets, you can see that the state’s unemployment rate has improved from a peak of 11.4 percent in early 2010 to under 7 percent in November 2013 (see the chart). In addition, the state has regained more than half of the jobs that were lost during the downturn. The leisure and hospitality, education and health care, and retail trade sectors have more jobs today than prior to the downturn. Regarding the first sector, my Atlanta Fed colleague Gloria Guzman wrote in a previous SouthPoint post that the leisure and hospitality sector has been a significant contributor to Florida’s economic recovery. Meanwhile, employment in the manufacturing and construction sectors still has a long way to go before full recovering can be declared.

Employment Loss and Gain by Industry: Florida, November 2013

The University of Florida’s Bureau of Economic and Business Research reported that although consumer confidence is off its recession lows, improvement has stalled. Despite that slowing, Florida sales tax revenue continues to rebound (see the chart). The Florida Department of Revenue notes that sales tax has been positively affected by the healthy activity in the leisure and hospitality sector.

Florida Sales Tax Revenue and Consumer Confidence, November 2013

The Atlanta Fed’s monthly real estate poll of homebuilders and brokers has noted improving home prices, and other data confirm this trend in Florida. The state has experienced an improvement in home prices of 8.4 percent from November 2012 to November 2013, according to the Federal Housing Finance Agency. Furthermore, the S&P Case-Shiller home price index shows similar trends in Miami and Tampa (see the chart).

S&P/Case-Shiller Home Price Index, through October 2013

Our monthly real estate poll also showed a rebound in residential construction (see the chart). Data from the U.S. Census Bureau confirm this trend, although it is important to note that activity is well below the prerecession peak. Although we do not expect a return to 2005 levels of activity, the steady rebound in new home construction is another signal of the state’s overall economic recovery.

New Residential Home Construction Permits, November 2013

Florida’s economy is clearly moving in the right direction. The Atlanta Fed’s surveys as well as regular input from business leaders and economic data all point to a steady rebound.

By Marycela Diaz-Unzalu, an economic and financial education specialist in the Atlanta Fed’s Miami Branch


January 28, 2014 in Construction, Employment, Florida, Housing, Prices, Real Estate | Permalink

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01/24/2014

Housing Continues to Rebound

The Atlanta Fed’s December 2013 Southeast housing market poll results show ongoing progress in the housing recovery. The majority of builders and brokers reported that sales on a year-over-year basis continued to be flat to slightly up (see the chart).

December 2013 Southeast Home Sales vs. a Year Earlier

After several months of reports of declining buyer traffic, most brokers and more builders indicated that buyer traffic was up on a year-over-year basis (see the chart).

December 2013 Southeast Buyer Traffic vs. a Year Earlier

The majority of brokers continued to report that home inventory levels had fallen from year-earlier levels, and most builders reported that inventory levels remain unchanged (see the chart).

December 2013 Southeast Home Inventory vs. a Year Earlier

The majority of brokers and builders indicated that home prices increased slightly in December (see the chart).

December 2013 Home Price vs. a Year-ago

Builders continued to indicate upward pressure on labor costs. More than 90 percent of builders reported that labor costs had increased in December 2013, compared with less than 80 percent in December 2012 and roughly 40 percent in December 2011 (see the chart).

Southeast Builder Labor Costs vs. One Year Ago

While half of all contacts reported that the amount of available credit is equal to demand, just shy of half reported that the amount of available credit falls short of demand (see the charts).

Brokers: How available do you perceive mortgage finance to be in your market?

Builders: How available do you perceive mortgage finance to be in your market?

Most contacts continued to report that the available construction and development finance falls short of existing demand (see the chart). Even so, several contacts commented that when the components of construction and development finance are broken out, credit for the vertical construction of structures is fairly available, but obtaining credit for lot development remains challenging.

Builders: How available do you perceive construction & development finance to be in your market?

During the next three months, builders expect sales growth to be flat to slightly up, and brokers’ expectations are mixed (see the charts). Expectations remain fairly positive overall, however; fewer contacts are as optimistic about sales growth as they were one year ago.

Southeast Builder Home Sales Expectations Next 3 Months

Southeast Broker Home Sales Expectations Next 3 Months

More than half of all builders expect activity to increase over the next three months, but the outlook is more subdued than a year earlier (see the chart). Fewer builders expect construction activity to increase over the next three months compared to one year ago.

Southeast Builder Construction Expectations Next 3 Months

Note: December poll results are based on responses from 44 residential brokers and 24 homebuilders and were collected January 6–15, 2014. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.

If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department



January 24, 2014 in Construction, Housing, Prices, Purchasing, Real Estate, Southeast | Permalink

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01/16/2014

The Beige Book Looks Rosy

The Federal Reserve released the first Beige Book of 2014 on January 15. To prepare the Beige Book—published eight times per year—each Reserve Bank gathers anecdotal information on current economic conditions in its district through reports from Bank and branch directors and interviews with key business contacts, economists, market experts, and other sources.

The first paragraph from the national summary began with this sentence:

Reports from the twelve Federal Reserve Districts suggest economic activity continued to expand across most regions and sectors from late November through the end of the year.

The Atlanta Fed was one of two Reserve Banks that saw conditions improve compared with the previous reporting period. Overall, we said that “[b]usiness contacts indicated that from late November through December overall economic conditions improved moderately in the Sixth District.”

Below are highlights from our report, beginning with the important sections on employment and inflation:

  • Businesses did not indicate a significant pickup in hiring, nor did they report any staff reductions. Businesses continued to employ technology and utilized overtime and contract labor as an alternative to increasing permanent staff. Contacts in manufacturing, construction, professional, and energy sectors report persistent difficulty in finding qualified workers. On balance, many firms expressed continued hesitancy caused by concerns about healthcare reform in terms of their overall hiring plans.
  • Cost pressures remained mostly stable, according to business contacts. Healthcare was the most cited exception, with reports of larger cost and price increases than usual. Merit increases remained in the 1 to 3 percent range. However, skilled and professional positions in energy, construction, information technology, and logistics continued to see above-average wage increases and higher starting pay. Year-ahead unit costs expectations were 1.9 percent in December, unchanged for the fourth consecutive month, according to the Atlanta Fed's survey on business inflation expectations.

Most sectors of the regional economy reported a solid start to the new year:

  • District merchants noted positive year-over-year holiday sales growth, with online sales outpacing traditional store sales.
  • The hospitality sector continued to experience the same solid pace of activity that it had all year long.
  • Residential housing brokers noted that existing home sales growth continued to slow, while homebuilders experienced modest growth in new home sales.
  • Commercial contractors described construction activity as improving, especially in the multifamily segment of the market.
  • Manufacturers indicated that overall activity strengthened since the previous report.
  • Capacity utilization in the energy industry remained near historic highs, and deep water oil exploration in the Gulf of Mexico increased.

Atlanta Fed business contacts held a positive outlook heading into 2014. Atlanta Fed President Dennis Lockhart shared this view in a speech delivered to the Rotary Club of Atlanta on January 13, where he said:

I expect the stronger pace of economic growth in the second half of 2013 to continue in 2014. My current view is that real GDP will expand between 2.5 and 3 percent this year, and I would not be surprised if we achieve results at the upper end of this range.

A new year often breeds optimism, sometimes misplaced. But based on our view of the data and what our business contacts are saying, we think that being optimistic this January is justified.

Photo of Michael ChrisztBy Michael Chriszt, a vice president in the Atlanta Fed’s public affairs department


January 16, 2014 in Economic Indicators, Employment, Growth, Housing, Inflation, Manufacturing, Prices, Productivity | Permalink

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12/19/2013

Southeast Housing Update: Sales Growth Slows

In an effort to stay on top of changing housing market conditions, the Atlanta Fed conducts a monthly poll of home builder and residential broker business contacts. The poll dates back to December 2005. It opens on the first Monday of each month, closes a week and a half later, and reflects activity from the previous month. Since the most current housing data often come with several months’ lag, we like to keep a close eye on this poll for any early signals that the housing landscape is changing.

According to the latest poll results, the majority of builders and brokers reported that sales on a year-over-year basis continued to be flat to slightly up. On a month-over-month basis, contacts indicated that sales continued to be flat to slightly down (see the chart).

November 2013 Southeast Home Sales vs. a Year Earlier

Nearly half the brokers indicated that buyer traffic was down on a year-over-year basis. More builders have also started to indicate that buyer traffic is declining (see the chart). Many of the comments we received from contacts suggested that seasonal factors are driving the decline in buyer traffic.

November 2013 Southeast Buyer Traffic vs. a Year Earlier

The majority of brokers and builders continued to report that home inventory levels were down from a year earlier (see the chart). Several contacts commented that they expect to see slight increases in inventory levels over the next few months as more homeowners regain equity in their homes.

November 2013 Southeast Home Inventory vs. a Year Earlier

The majority of builders and brokers continued to indicate home price appreciation in November (see the chart).

November 2013 Home Price vs. a Year-ago

Over the past two months, more builders have begun to indicate that they are having a difficult time filling positions compared with a year earlier (see the chart).

November 2013 Southeast Homebuilder Survey: Difficulty Filling Positions vs. a Year Earlier

When asked how labor costs compare with a year ago, more than 30 percent of builders indicated that they are experiencing increases of 3 percent or more (compared with 20 percent of builders one year earlier and 10 percent of builders two years earlier; see the chart).

Southeast Builder Labor Costs vs. Year Ago

More broker and builder contacts expect to see home sales growth over the next few months relative to last month’s report, although expectations for home sales growth are slightly weaker than a year earlier (see the charts).

Southeast Builder Home Sales Expectations Next 3 Months, Year-over-Year

Southeast Broker Home Sales Expectations Next 3 Months, Year-over-Year

Fewer builders expect construction activity to increase over the next three months compared with a year ago, although expectations for activity have increased from recent reports (see the chart).

Southeast Builder Construction Expectations Next 3 Months, Year-over-Year

Note: November poll results are based on responses from 43 residential brokers and 21 homebuilders and were collected December 2–11, 2013. The housing poll's diffusion indexes are calculated as the percentage of total respondents reporting increases minus the percentage reporting declines. Positive values in the index indicate increased activity, and negative values indicate decreased activity.

If you are a real estate broker or homebuilder and would like to participate in this poll, please let us know by sending a note to RealEstateCenter@atl.frb.org.

Photo of Jessica DillBy Jessica Dill, senior economic research analyst in the Atlanta Fed's research department


December 19, 2013 in Construction, Housing, Prices, Real Estate, Southeast | Permalink

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12/16/2013

Retailers Channeling Elvis

Popularized by Elvis Presley in 1957, Blue Christmas laments feelings of missing someone during the holiday season. It could be said that, based on preliminary results, brick-and-mortar retailers are channeling Elvis as they too are missing someone this holiday shopping season...the consumer.

Merchants are experiencing a shortened holiday shopping season with Thanksgiving falling later in the month of November. With six fewer shopping days, retailers approached this season with deeply discounted merchandise in an effort to attract foot traffic on Black Friday, the day after Thanksgiving and the traditional start to the holiday shopping season. Many stores even opted to open on Thanksgiving to entice consumers to shop. However, the efforts appear to have fallen short of expectations as shoppers have been very cautious with their spending this year. According to the National Retail Federation, shoppers spent 2.9 percent less during the Thanksgiving weekend this year versus last year. Additionally, both the Conference Board’s (CB) and the University of Michigan’s (UM) consumer surveys indicated consumer confidence with current conditions decreased in November, and future expectations were mixed (CB decreased; UM increased slightly).

But all is not lost. E-commerce appears to be emerging as the shining star in the retail industry. Even though retailers may feel like it “won’t be the same dear, if you’re not here with me,” the expectations for Cyber Monday, the Monday after Thanksgiving, to be the busiest online shopping day of the year seem to have been proven true. Last year “showrooming” (consumers visiting brick-and-mortar stores and comparing prices on their mobile devices) posed a huge concern; however, this year retailers appear to be embracing the online shopper. With all indications that the consumer has become more comfortable purchasing items online using their smartphones and tablets, retailers decided to enhance their mobile sites by offering huge discounts, free shipping, and customized shopping experiences in order to drive sales to their own online sites. November’s retail sales numbers seem to support this. Although overall sales were up, nonstore retail (online) posted the largest gain. Other evidence that online shopping is the wave of the future is that of a major shipping company indicating double-digit percentage increases, year over year, in the volume of items processed during the Thanksgiving weekend.

So, will retailers “be so blue just thinking about you” over the 2013 holiday season? Will they at least meet their sales expectation or experience some growth? Only time will tell as there are only a few shopping days left.

Happy shopping!

By Christine Viets, a Regional Economic Information Network analyst at the Atlanta Fed’s Jacksonville Branch


December 16, 2013 in Holiday, Holiday Sales, Prices, Retail | Permalink

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12/13/2013

November PMI: A Harbinger of Future Expansion?

Manufacturing in the Southeast has performed fairly well in 2013 based on the southeastern Purchasing Managers Index (PMI) report. Every month this year, with the exception of September, has registered expansion in the manufacturing sector. Although most of the monthly data have not been spectacular, they have, shall we say, held the line. November was no different, registering 52.2 points. The November report was a modest gain of 1.8 points over October. The disconcerting element found in this year’s PMI reports has been the low production expectations of survey participants. Since April, month after month had seen low production expectations for the next three to six months. That trend finally took a turn for the better in November.

The southeastern PMI is produced by the Econometric Center at Kennesaw State University. The report surveys purchasing managers from the states of Alabama, Georgia, Florida, Louisiana, Mississippi, and Tennessee. The index is a composite index that equally weighs five indicators including, new orders, production, employment, supplier delivery times, and finished goods inventory. A reading on the index above 50 represents an expansion in the manufacturing sector, and a reading below 50 indicates a contraction.

New orders, production, and supplier delivery times indicators rose in November. The new orders indicator increased 3.1 points in November to 55.1, and the production indicator increased 4.1 points to 55.1. The supplier delivery times indicator increased 4.0 points to 53.1, meaning purchasing agents are waiting longer to get the supplies they ordered. November’s report saw a mild decline in the employment indicator as it dropped 0.9 points to 52.0. The employment indicator still reads above 50, which generally indicates payrolls are growing. The finished inventories indicator fell 1.1 points, which indicates low customer inventories and which could in turn lead to greater future production.

Southeast Purchasing Managers Index

All indicators in the southeastern PMI index could be viewed positively in November, but the most encouraging aspect of the November report was the increase in the level of optimism. When asked about their production expectations during the next three to six months, 45 percent of survey respondents said production will be higher, a healthy increase from October’s tepid 27 percent. Optimism had been waning throughout the summer and fall months. The November increase gives us a boost of hope that manufacturing in the Southeast will continue its expanding ways as we close out 2013. Looking ahead, one could say that many signs point to a strong December. Mix up some expanding new orders, higher production, lower inventory levels, supplies that are in high demand, add a dash of optimism, and it just might make a pretty good manufacturing dish.

By Troy Balthrop, a Regional Economic Information Network analyst at the Atlanta Fed’s Nashville Branch

December 13, 2013 in Employment, Manufacturing, Prices, Productivity, Southeast | Permalink

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